01-21-1992 - Appropriation of Funds From Unappropriated Self-Insurance Reserve0 City of West Covina
Memorandum
TO: City Council and City Manager
FROM: Finance and Risk Management AGENDA
SUBJECT: APPROPRIATION OF FUNDS FROM ITEM NO.:: F-1
UNAPPROPRIATED SELF-INSURANCE
RESERVE DATE January 21, 1992
SUMMARY: The Council will consider an additional appropriation
of $95,326from unappropriated self-insurance reserves,
to cover a premium adjustment.
Background:
The City of West Covina, as a member of the Independent Cities Risk
Management Authority (ICRMA), participates in the Liability Risk
Management Program for the purpose of procuring excess liability
insurance coverage. The annual audit of ICRMA's Liability Program
Reserves has resulted in a mid -year Risk Premium Adjustment to the
City in the amount of $95,326.
Analysis:
Risk Management had an approved budget of $511, 000 for the purchase
of General Liability Insurance for Fiscal Year 1991/92. This
budget, as in previous years is based on the maximum premium which
ICRMA may charge the City for liability insurance coverage. The
actual amount charged is not known until after the beginning of the
fiscal year and is impacted by several factors, including ICRMA
reserves, the City's past history and the level of the City's Self -
Insured Retention (SIR). Due to an increase in,the City's SIR
amount coupled with a credit which was applied toward the City's
premium, West Covina actually paid $321,930, a net savings of
$189,070 from the budgeted premium amount.
Risk Management's funding for liability insurance is derived by a
charge to each of the City's operating departments. In,September,
1991, Council approved the reduction in departmental charges by
$188,000, thereby reducing the City's operating budget. This
action was one of several components used to address 'the budget.
deficit created by the reduction in State funding.
In December, 1991, ICRMA conducted their annual audit of their
outstanding liability pool reserves. The audit concluded that the
reserves calculated for fiscal year's 1987-88 and 1989-90, which'
are still active years in terms of when claims were filed but not
yet settled, were under -funded. In order to bring the reserve to
the required levels, ICRMA has made the appropriate adjustments in
member city premiums. The adjustment for West Covina is $95,326,
which is due by January 31, 1992, to insure that ICRMA maintains
the required reserve levels and that West Covina does not lose any
liability insurance coverage. These funds remain the property of
the City of West Covina and will earn interest while on deposit.
If the money is not used to pay claims, it will be refunded to the.
City at a future date or credited against future premiums.
Fiscal Impact:
There are adequate funds available in the City's self-insurance
reserves to fund the premium adjustment. Staff is recommending
that Council appropriate $95,326 from the self-insurance reserve
fund to provide for the mid -year adjustment in the City's liability
insurance premium.
RECOMMENDATION:
It is recommended the City Council approve an appropriation of
$95,326 from unappropriated self-insurance reserves to fund the.
necessary Risk Premium Adjustment.
0
AbraDgm W. Konia ky
Finance Director
.Erin Patricia Hoppe
Risk Manager